Emerging Markets Are Starting to Unravel for Some Companies

Company chiefs also are being pressed in unprecedented ways by so-called rising “global challenger” companies that are taking more share in their domestic emerging markets and even venturing more boldly than before into western markets.

Coca-Cola and McDonald’s are the latest global firms to experience the slowdown taking place in emerging markets where U.S.-company CEOs have put a great deal of effort recently. Company chiefs also are being pressed in unprecedented ways by so-called rising “global challenger” companies that are taking more share in their domestic emerging markets and even venturing more boldly than before into western markets.

“Stagnation in emerging markets is wreaking havoc on American firms.”

Over the last several years, European and American CEOs have spread their wings in the BRIC—Brazil, Russia, India and China—markets and other emerging countries as a way to tap into where consumer spending was growing and as insurance against the maturation and relatively slow growth of the western economies of North America, Japan and Europe.

But a funny thing happened: These emerging markets haven’t fully emerged, and some have regressed. China has come through on projections, but not so much elsewhere. And very recently, China’s economic growth has cooled while India, Brazil and especially Russia have proven even less dependable.

As a result, the stagnation in emerging markets is catching up with companies like McDonald’s, where CEO Don Thompson is coping with major issues stateside, and Coca-Cola, where CEO Muhtar Kent is trying to reverse a secular decline of massive proportions in consumption of the company’s main product. These are not isolated incidents, however. Rather, they are emblematic of a wider problem that is afflicting more and more companies.

McDonald’s’ problems may be episodic, including a meat-supplier scandal in China and government interference with some of its outlets in Russia that helped drive same-store sales down by 9.9% in the chain’s Asia/Pacific, Middle East and Africa regions in the third quarter.

CEO CONFIDENCE INDEX

Chief Executive’s most recent reading of CEO confidence in future business conditions slipped from 7 out of 10 in October to 6.9 in November. It was a new low for 2018 as business leaders begin to prepare for a possible downturn ahead.

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